Editor’s Note
This article examines the recent divergence between diamond and gold prices, highlighting a notable decline in the diamond price index amid broader commodity inflation.
Recently, diamond prices have been on a downward trend, making the phrase “a diamond is forever” seem hollow. This contrasts sharply with the soaring price of gold, which has been on a high-altitude march, surpassing $2,400 per ounce last month, amidst ongoing global inflation in raw material and mineral prices.
According to the International Diamond Exchange (IDEX), the diamond price index as of the 30th was 105.94, down about 14% from a year ago (123.46). Compared to the all-time high of 158.69 in March 2022 (2021=100), this represents a drop of over 30%. In contrast, gold prices show no signs of coming down due to factors like surging demand in China and a preference for safe-haven assets. As of the 30th, the price of gold per troy ounce was trading at $2,333.83, up about 20% from a year ago.
On the supply side, the factor pulling down diamond prices is the emergence of ‘Laboratory Grown Diamonds’. Lab-grown diamonds are artificially created in laboratories and are priced at about one-fifth the level of natural diamonds. However, their physical and chemical properties, such as composition, refractive index, and hardness, show little difference from natural diamonds. For mid-to-high-grade stones, a natural diamond costs around 15 million won per carat, while a lab-grown diamond costs about 3 million won. They are also free from ethical issues like environmental destruction and labor exploitation that can occur in the natural diamond mining process.
Lab-grown diamond specialist brand Alod stated, “May sales increased by 500% compared to the same period last year.” The lab-grown diamond market is projected to grow from $8 billion (11 trillion won) last year to $49.9 billion (68 trillion won) by 2030.
On the demand side, the decline in preference for diamonds among Chinese consumers has led the price downturn. Citing estimates by diamond analyst Paul Zimnisky, the South China Morning Post (SCMP) reported, “The diamond market in mainland China, Hong Kong, Macau, and Taiwan decreased by about 7% over two years, from $13.7 billion (about 19 trillion won) in 2021 to $12.8 billion (about 17.5 trillion won) last year.”
Some argue that the global economic downturn has led to an increase in couples giving up on engagement rings or marriage itself, reducing diamond demand. Another interpretation is that as people, who were restricted in outdoor activities during the COVID-19 pandemic and spent on luxury goods or jewelry, have focused on leisure activities after the pandemic subsided, diamond demand decreased, leading to lower prices.
Due to the popularity of lab-grown diamonds and declining consumer demand, the world-renowned British diamond company ‘De Beers’ is facing a sale crisis. According to The Economist, De Beers, which once enjoyed a monopolistic position distributing up to 90% of the world’s diamond production, saw its sales drop by more than a third last year compared to the previous year, failing to avoid poor performance. Forbes pointed out, “While artificial diamonds are gaining popularity, companies specializing in natural diamonds are being shaken by deteriorating demand for traditional diamonds and price declines due to oversupply.”
